Answers · UK 2025/26
How does PAYE work in the UK?
PAYE (Pay As You Earn) is the UK system for collecting Income Tax and NI from employees through deductions before they receive their pay. HMRC issues your tax code; employer deducts the right amount each pay period; remits monthly to HMRC.
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UK PAYE mechanics 2025/26. Setup: starting a job, employer takes your P45 or starter checklist. Submits Real-Time Information (RTI) to HMRC each pay period. Tax code: HMRC issues annual code (e.g. 1257L) reflecting tax-free allowance + adjustments. Cumulative basis: spreads £12,570 PA evenly across pay periods, auto-corrects for variations. Week-1/Month-1 (non-cumulative): emergency codes treat each period in isolation — can cause initial over-tax. Deductions order: Income Tax, NI, then student loan, then pension. Reporting: employer files FPS each pay period, EPS monthly, pays HMRC by 22nd of month. Year-end: P60 by 31 May. Wrong PAYE: HMRC reconciles via P800 July-November after tax year end.
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This answer is informational only and does not constitute financial, tax or legal advice. Figures are for the 2025/26 UK tax year. See our methodology and sources.